Saudis Said to Maintain Oil Output After Biggest Cut Since ’12

Saudi Arabia, the largest crude producer in OPEC, plans to keep output steady until the end of the year, a person with knowledge of the country’s oil policy said. It made the biggest cut in 20 months in August.

Output through the end of the year won’t differ much from August, when the country pumped 9.597 million barrels a day, according to the person, who isn’t allowed to be identified. The nation reduced production by 408,500 barrels a day last month, the most since December 2012, according to its most-recent submission to the Organization of Petroleum Exporting Countries. Demand will rise by the end of the year because of northern hemisphere winter, the person said.

Oil demand growth was the weakest since 2012 in the second quarter and industrialized nations’ stockpiles in August rose by more than twice the normal amount for the time of year, according to the International Energy Agency. Brent, the world’s most-active crude contract, is close to a two-year low. OPEC may cut its output target next year, the group’s secretary general said Sept. 16.

“It does make sense, even though prices are falling,” Gareth Lewis-Davies, a senior energy strategist at BNP Paribas SA, said by phone from London. “Globally, demand for crude is set to increase on a seasonal basis and as new refineries in the Middle East and China ramp up. If the Saudis cut, they would lose market share and that’s always a concern because it’s difficult to get it back.”

OPEC Target

Brent for November settlement is heading for a weekly loss this week, falling 1.4 percent since Sept. 19 to $96.97 a barrel at 11:11 a.m. in London on the ICE Futures Europe exchange.

OPEC’s daily output target could fall by 500,000 barrels to 29.5 million barrels in 2015, Abdalla El-Badri, the group’s secretary general, said at its secretariat in Vienna on Sept. 16. OPEC’s monthly report on Sept. 10 showed demand for its oil will drop to 29.2 million barrels a day in 2015 from 29.5 million this year.

Oil inventories in developed countries probably rose by 19.2 million barrels in August, the IEA said on Sept. 11. Second-quarter demand growth fell to 480,000 barrels day, compared with a year earlier, the first time in about two years that it’s been below 500,000 barrels a day, the IEA said.

6 Comments on "Saudis Said to Maintain Oil Output After Biggest Cut Since ’12"

forbin on Fri, 26th Sep 2014 9:49 am

huh in response to Matt Simmonds a few years back it was

12 or 15 Mboe per day

now its 9.6 , and it reduced by 0,4 last month – doing well then , they were at 8.5 back in 2010 ….

Forbin

rockman on Fri, 26th Sep 2014 10:07 am

Again it’s all about the balance. The KSA could force the price of oil back up if the reduced production enough. They could be selling oil for more $’s per bbl. But their cash flow would be less. The same reason (except on a much larger scale) why very few US companies reduce oil production rates when prices drop: CASH FLOW IS KING! LOL.

In reality many operators try to squeeze a few more bopd out of the ground in the face of falling prices. So is that the same thing the KSA is doing: increasing/maintaining production rates to max cash flow and not profit margin?

Feemer on Fri, 26th Sep 2014 2:07 pm

Hopefully oil prices stay low so Russia feels some economic pain!

Perk Earl on Fri, 26th Sep 2014 2:19 pm

“It made the biggest cut in 20 months in August.”

I take it there is some lag time between cuts and expected oil price rise. We don’t know from that article when in August the cuts were made, but we are now in late September. Maybe in winter price will rise?

The sooner we transition away from fossil fuels the better. Do you really want to rely on the Saudi’s and Russia for oil? As the number of oil exporters gets smaller because of rising use at home and declining supplies, Russia and the Saudi’s will hold an even larger grip on world oil supplies. We can see how well relying on Russia for energy worked for Ukraine.

Transitioning away from fossil fuels is a matter of energy security and economic security.

Wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste can all be produced LOCALLY and will provide LOCAL JOBS. Decentralized energy sources will take the place of massive centralized energy sources that rely on fossil fuels.